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MAS chief shares his experience

(Singapore: 10 November 2006) Speaking at Outlook 2007, Malaysian Airlines (MAS) Managing Director, Idris Jala, candidly answered questions from the assembled aviation leaders, affording the gathering unusual insight into his plans for the Malaysian flag carrier.

Outlook 2006

Mr Idris, who the previous evening accepted the Airline Turnaround Award on behalf of his carrier at the CAPA Awards for Excellence, took over the reins of the carrier in Dec-05, after a long career in the petroleum industry. Answering a wide-ranging series of questions, Mr Idris touched on many of the key questions facing MAS as he attempts to take the carrier from loss to profitable growth in three years.

On the differences between the airline and petroleum industries: Having worked for 24 years in the petroleum business, I was surprised to see how little focus there was on profit and loss. This is critical: we focus too much attention on activities that do not contribute to profits. If we don’t change this, we cannot turn the company around.

On the pace of his programme: If you don’t move quickly and implement change all at once, it won’t happen. If you drag the reform process out, you lose the confidence of investors and staff, and the staff – the people who have to make it happen – get fatigued and you lose momentum. When we focused our first year’s attention on stopping cash burn, we acted right away: we slashed 15 international routes, turned a lot of the domestic operation over to AirAsia, eliminated 15% of the staff and sold many of our nonperforming assets, such as our headquarters building.

On the A380 delays: We were surprised by the first delay, but the second delay caused us to really sit down and think hard about what to do. Airbus still hasn’t given us a precise date on when they will deliver the aircraft to us. All options are on the table and discussions are underway.

On its hedging programme: We are currently 75% hedged at roughly USD57/barrel. We will not take a long-term hedge position, as this to me feels a bit too much like a trip to the casino. When I worked at Shell, I was always surprised at how inaccurate our in-house forecasts were.  Our position is to follow what the competition does. If they hedge more, we’ll hedge more; if they hedge less, we’ll hedge less. That way if the industry’s wrong, we’re all wrong together and we’ll fix the situation together.

On liberalised air service agreements in the region: We are happy with the current arrangement, which calls for intra-ASEAN liberalisation by Dec-08. We’ll be ready to compete by then. For the KL-SIN route “we have told the government that we need until the end of 2008” under the existing arrangement (where only Malaysia Airlines and Singapore Airlines are admitted).

Outlook 2007 is the Centre for Asia Pacific Aviation’s annual examination of the prospects for the Asia Pacific airline industry. Convening in Singapore with the participation of 30 CEOs and 380 vital stakeholders from all components of the aviation sector, Outlook 2007 and the CAPA Aviation Awards for Excellence is the year’s premier gathering of the region’s aviation decision makers, providing a forum for dialogue between leaders from the airline, airport, supplier and regulatory communities.  

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